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Do you own the mineral rights to your property?

Seems like everyone is talking about mineral rights these days.

We all know someone in the area who’s been contacted by an exploration company looking to lease or buy mineral rights to their property.

First off, what exactly are mineral rights, and why are they important?

Holding mineral rights to a property means that you have the right to exploit the area for the minerals it contains. This could include sedentary minerals such as coal or metal ores, or fluid minerals such as oil and gas.

Mineral rights are important because if you do own the mineral rights to your property, you can sell, lease or donate those minerals to any person or company.

How do you determine the value of your mineral rights?

Finding accurate information on the real market value of the mineral rights to your property can be difficult, and taking the first offer an exploitation company offers you is very tempting.

After all, very few homeowners ever expect to leverage their mineral rights, and receiving royalty cheques from oil and gas companies for something you’re never planning to use is an easy way to receive additional income.

It’s also important to keep in mind that an oil well can only get drilled when someone has come up with the money to pay for it, which is still an expensive proposition even for the giants of the oil and gas industry. So it has to make financial sense for the potential buyer of your rights to exploit the potential of your property.

Do you own the mineral rights to your property?

Mineral rights can be separate from property ownership, which is called a “severed estate” – you could own your property but not the mineral rights to it, either knowingly or unknowingly.

Given Colorado’s rich mining history, it is not unusual for the mineral rights to a property to be owned by someone other than the title owner.

If you do own the rights, you have multiple options for monetizing your minerals. Selling them outright will provide you with instant income, but beware of tax implications. Negotiating a lease from an exploitation company or an agent can be simple, but may not provide you with the best return. Another option is to participate actively in the exploitation of your property as a non-operating owner in the well, but this means you could possibly being on the hook for the cost of extracting the minerals from your land.

We can help you with the first step, which is to run an “Ownership and Encumbrances” (O&E) report on your property that will tell you who owns what on your property. Then you’ll be on your way to making informed decisions about the rights to any minerals on your property.

Should I sell my current home before buying a new one?

Selling a home while house hunting can be a bit of a balancing act.

It can also be a little trickier in a market like Denver, which is inching toward a buyers’ market but is still considered a sellers’ market.

Why? Well, sellers with a good choice of buyers are much less likely to accept an offer that is contingent on the sale of your home.

You can avoid a contingency clause in your offer by getting a bridge loan, which is essentially a short-term loan designed to ease the financial strain of buying a new house before you sell your old one. You pay off your mortage with a bridge loan, and when your home sells, you use the proceeds to pay off the bridge loan.

Bridge loans can be a gamble, though, as they often come with very strict terms and high interest rates.  Plus, if there is a problem with either the closing of your former or new home, you are still responsible for paying back the loan within the time frame agreed upon, or finding yourself with hefty monthly interest payments until you sell your old home.

Another option, if it does not stretch you financially, is to keep two properties for a bit. This is the safest option, as you can make offers on new homes without having to worry about making contingency offers or needing a bridge loan.

If having both homes is not an option for you, your best bet in a sellers’ market would likely be to sell your home first and buy second. This means less risk, since your sale is closed and you’d know exactly how much your budget is for a new home.

However, this also means you may have to consider options if you need to move out of your home at closing, which can include renting a storage space for your furniture and staying at a hotel or AirBnB, or a month-to-month lease.

Another great option is to negotiate “renting” your home from your buyer for 30-60 days if the buyer is flexible on their date of occupation. This would buy you time to make offers on new homes that would not be contingent on selling your home. Plus, you wouldn’t have to move twice.

Still unsure what to do? Feel free to contact us! We can help you figure out which option is best for your particular financial situation.

Should I co-buy a property with a friend?

Co-buying is becoming a more and more popular way to enter the real estate market, and pooling resources with a trusted friend or partner is a great way to enter expensive housing markets.

However, the living arrangement might not work for everybody.

First of all, what is co-buying?

Simply put, co-buying is the sharing of property ownership by more than one person.

In most cases, two or more people create a co-buying agreement to live together in the purchased property. In some cases, only one partner lives in the property, or neither lives there and it becomes an investment property.

The payoff from co-buying can be immense. You’ll be able to shop for houses in a higher price range, keep more money in your pocket each month, build your wealth and have a partner to share household chores and expenses with.

However, co-buying does involves what might be uncomfortable conversations with your buying partner.

You’ll need to share personal financial information, determine the value of each co-owner’s share in the property and negotiate an agreement that works for both partners, including an exit strategy if one person decides to sell.

Will you be equal partners? Is everyone investing the same amount of money? Will you all contribute to a contingency fund? These discussions need to occur before the basement floods or the furnace stops working.

On the plus side, mortgage companies have started creating financing solutions tailored to co-owning due to increased demand.  These “family and friends” mortgages can be accompanied by an agreement on who pays what percentage of the mortgage.

But beware! If one partner does not pay their portion of the mortgage payment, the lender will expect full payment regardless. Even if in the agreement your ownership and portion of the mortgage is 40%, you will still be liable for the full payment should another party not pay. So you may consider putting three months of mortgage payments into a trust.

Overall, if done smartly, a co-buying scenario can work well for everyone.

Interested in co-buying with a friend or partner? Get in touch with us!

Top Five Flip Tips

Real estate investing is hot right now. With so many HGTV fix-and-flip shows, everyone seems to have an interest in rehabbing a house and making a tidy profit.

But beware! Real estate investing, especially flipping houses, absolutely requires professional advice and an experienced real estate agent to guide your decision-making. We’ve done a number of flips in several markets over the years, and here’s the top five things that we’ve learned.

1 – Location, location, location

Find a home in a desirable neighborhood or one that’s on its way up in the very near future. I can’t stress this enough. You can improve a house all you want, but it’s virtually impossible to improve an entire neighborhood on your own.

What should you look for? Areas with rising real estate sales, employment growth, new shopping and dining options, infrastructure developments and other indicators that the area is thriving.

2 – Numbers, numbers, numbers

Most inexperienced investors only look at the pot of gold at the end of the rainbow and fail at doing an in-depth analysis of how to get there.

Numbers should drive absolutely everything you do in real estate.  If the numbers don’t work, as hard as it can be, and no matter how much you like the property, or the partners, or the neighborhood, you need to walk away.

If you are sloppy with your estimates, and don’t account for hidden or unexpected carrying or renovating costs, you will be left disappointed with the results.

3 – Find the right things wrong

When looking for a property to flip, especially if you’re just getting started, focus on homes that require mostly cosmetic improvements.

A house or building that needs a new roof or plumbing will very likely require investing too much money – and time – into the house to turn a nice profit.

Focus on homes where inexpensive improvements can have a huge impact on how the home shows, like a fresh coat of paint, new carpets, sanding and refinishing hardwood floors, replacing trim and sleek new kitchen appliances.

4 – Plan for an alternate exit strategy

Every flipper’s goal is to buy low, sell high and fast and make a tidy profit. But there will always be factors out of your that may change your projected outcome.

What if the market you bought in shifts? If financing rules or interest rates change? If the economy tanks? It’s a real possibility that you may be unable to sell your finished property for your ideal price.

What’s more, you may spend more than your original budget, overestimate your sale price, or take too long to complete your project. So planning to rent your property or live in it, rather than taking a loss, is sometimes a better option.

5 – Find a great contractor

If you’re handy, you may opt to do some or most of the renovations yourself. This can save you a significant amount of money – if you know what you’re doing.

Knowing when to do it yourself and when to hire an expert is crucial. Hiring a general contractor can be expensive, adding up to 20% on to your renovation estimates. But they can be worth their weight in gold.

A great contractor can help you avoid costly mistakes and save you significant time, which means you can list your property faster and reduce your carrying costs.

Think flipping is for you? We’d love to help you find a property that’s right for you and set you up for success. Contact us today!


Let’s Talk Leverage

“Once you own real estate and rents go up, it’s stupid to sell. Never sell your real estate; just use it as a piggy bank.”

Barbara Corcoran, founder of The Corcoran Group and Shark on “Shark Tank”

Let’s talk about leverage.

Simply put, leverage is using other people’s money to make more money for you.

In the stock market, you pay 100% of your money to control 100% of your investments. In real estate, you can pay 20% of your money to control 100% of a property.

Let’s say you own a house that is worth $500,000 with a mortgage for $300,000. Your property has increased in value since you purchased it, and you’d like to access some of this equity to buy another property.

If your appraisal comes in at $500,000, assuming you qualify based on the lender’s guidelines, the lender will give you 80% per cent of the appraised value, which is $400,000.

Since you currently have a first mortgage of $300,000 with the lender, this means that you now have access to an additional $100,000 to grow your portfolio.

Another option is a full mortgage refinance, which means taking out equity by breaking the current mortgage and increasing its current balance by the amount you are taking out.

If your mortgage is up for renewal or there are minimal penalties for breaking your mortgage, a refinance is an option to consider, as it also offers an opportunity for consolidating any non-secured debts, negotiating better interest rates with your lender and shopping for cheaper rates and better terms.

Looking for equity above the maximum 80% of appraised value that traditional lenders such as banks, credit unions and trust companies can provide to take advantage of an opportunity? You may be able to take out 90% through private funding.

Are you looking to invest in property? We can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you, or how much they could save you right now. Get in touch and let’s get started!

Buing your first home – part 1

Buying your first home can be very exciting but a little overwhelming. You’ll want to do it right, and we can help you understand what to expect at every stage of the process.

We’ll make sure that you understand your options, the home-buying process and when to engage the other professionals who make up your home-buying team.

Step one – your budget
The first thing to do before buying a home is to make sure it’s the right time to do so. Although it may not always be feasible if you live in an expensive real estate market, you should aim to try to keep your total housing payment under 35 percent of your gross monthly income.

When you spend much more than that on your housing, you risk becoming “house poor” — you might live in a beautiful home but find it difficult to save or even cover other monthly expenses.

You should also consider the cash you’ll need to make buying your first home a reality. A down payment is typically between 3.5 and 20 percent of the purchase price.

As you save, don’t underestimate how much money you’ll need — you might be surprised at how much cash you’ll need for closing, and you never know when that hot water tank could break down.

Finally, if you’re close to putting an offer on a home, begin to collect documents that you’ll need to verify your finances on the mortgage application: paystubs, W-2’s, bank statements and, if you have freelance or self-employment income, copies of your last two tax returns.

Step two – finding the right real estate agent
While having a real estate agent is not a necessity for finding and buying a home, it is highly recommended, particularly for your first home purchase. Having an expert to rely on who is knowledgeable about the market you are looking in and the steps to finding and closing the sale of a home to lead you through the process could take a big weight off your shoulders.

What’s more, a good agent will always have a network of other professionals you will need in this process like home inspectors, insurance agents and mortgage brokers who will be a part of your home-buying team before and after your purchase.

Feel free to contact a few agents and choose the one you have the best rapport with. Your agent will be playing a big role in the home buying process and it’s important to choose someone you feel comfortable with.

Step three – a mortgage
Getting pre-approved for a mortgage is always a good idea. It’s an important first step in the home-buying process – you don’t want to start house-hunting and fall for a home you can’t afford.

Your credit score is one of three factors that will be considered before you get approved for a mortgage, so make sure your credit is in order, as there may be problems with your credit that you don’t know about, like a department store credit card that you forgot to cancel. The other two factors are your income and your down payment.

With regards to your income, if you’re accustomed to paying a fairly low rent and transitioning to a mortgage, you’ll need to consider your lifestyle.

For instance, you may have done your budget calculations and find our you are able to afford your own home, but you should realise that you might need to give up going out for dinner or trips with friends because you’re going to be paying a mortgage now.

One good question to ask yourself is the following: if you lost your job and weren’t working for three months, would you be able to afford your home? Or are you stretching yourself too thin?

As for your down payment, keep in mind that the bigger the down payment, the smaller your mortgage and overall interest charges will be.

Step four – start the search
We’ve all seen the real estate shows with the gorgeous multi-million dollar properties. Your first home will most likely look nothing like that. The kitchen might need an update, the walls might be a terrible colour and the backyard could be overgrown with weeds.

Have an open mind. Wallpaper can be removed, walls can be painted and countertops can be changed. The things you should be most concerned about is whether the location, size and layout are right for you, along with the condition of the roof, plumbing and hot water tank.

Remember, it’s your first home and you very likely will not be living there forever: most people only live in their first home for 7-10 years. It’s called a “starter home” for a reason.

Next week we’ll explore making an offer, closing the deal and the steps to take once your offer is accepted.
As always, please reach out with any questions or comments!

Scott Masters

Investing in Real Estate

Real estate is a common investment vehicle, and Denver is a great market. Although real estate presents numerous opportunities to get a great return on your investment, be aware that property investments are far more hands-on than other investments such as stocks and bonds.

Real estate investments work in a couple of ways, and the Masters Real Estate Group can help you determine which investments could be right for you and your investment goals.

Some investors like to buy properties at the best possible price, make small- or large-scale improvements upon them, and “flip” them for a profit. Others pursue a “buy and hold” strategy, and purchase homes, duplexes or other types of property with the purpose of keeping them for a longer period of time and using them to generate passive income.

Both strategies can work for you, depending on your budget as well as your individual investment and portfolio growth goals.

What are the best types of investments?

There are two major factors to consider when making a decision to invest in real estate. In the short term, you need to crunch some numbers and be confident that the property you purchase will produce enough income to cover the expenses associated with holding the property. Your long-term strategy should involve purchasing a home in an area that has historically appreciated in value, or an up-and-coming area that will do so in the near future.

Choose your investment property carefully. Our agents at the Masters Real Estate Group can create a comparative market-value analysis of any home or property you’re considering to see how the price and amenities compare with those recently sold homes in the area as well as other properties on the market.

We can prepare a historical analysis showing how homes in the area have appreciated over time, and we can find out if the neighborhood has a glut of rental properties or if the property you are considering will be one of the few that future tenants have to choose from.

What is involved for a beginner?

Buying an investment home is no more complicated than buying your own home. You’ll want to ensure that you prequalify for a mortgage, which gives you better standing with the seller when you make an offer.

You can work alone or with one of our agents to find a home that you’re interested in buying and do your research regarding the comparative market value on your own or with us. Just as with any other real estate purchase, you’ll make an offer, come to an agreement with the seller, sign contracts, and close on the home.

Should I invest in out-of-area homes?

We recommend that new investors seriously consider buying property near their own home. Dealing with tenants and service providers is much easier when the property in question is within driving distance. Only when an investor has gained enough experience managing the particular set of challenges that comes with owning an out-of-area property should an investment property in another area be considered.

One important thing to keep in mind when creating a real estate investment strategy is that real estate trends vary from area to area. While it might be a buyer’s market near you, in other parts of the state or country, or even across town, homes may be receiving multiple offers. We can help you make sure you know what’s going on in any area before you consider investing.

Think you’re ready to make the leap and purchase an investment real estate property in Denver or beyond? Get in touch with us here at the Masters Real Estate Group.

Home Selling Checklist

Selling your home? We’ve created some tips and tricks to make sure your property shows at its maximum potential!

Make Small Fixes:

Do a complete walkthrough of every room in your house through a buyer’s eyes, and make a list of the things that could be improved. If you can, correct the flaws that are most visible (if affordable) or those that can be relatively easily fixed—from repairing cracks in the walkways to repainting dingy walls or oiling creaky hinges.

Set a Price:

Most real estate agents will give you a market analysis free of charge or commitment. Feel free to invite more than one agent to meet with you to get a broader picture of the market, then ask to see listings for properties similar to yours that have sold in the past six months. Be sure to check out comparable listings yourself in the real estate section of your newspaper or on websites. Then, decide whether you want a quick, easy sale or if you’re willing to wait for the highest possible price.

Clean and De-clutter:

Weed out excess furniture, knickknacks, toys, and “stuff”—toss it, donate it, give it away, lend it to a friend, sell it at a yard sale, or put it into storage so the house seems more spacious.  Consider putting away personal items such as photographs, kids’ artwork, diplomas or collections so buyers can imagine themselves living there.

Decide Whether to Perform a Pre-listing Inspection:

It may save you time, especially with older homes, to identify and potentially solve problems your buyer’s inspection will discover later.

Stay Vigilant About Maintenance:

From the moment you start showing your house, keep the lawn mowed, shrubs trimmed, gardens weeded, and keep your rooms spotless and clutter-free so you’re always ready for a last-minute showing.

Ready Your Home for Show Days:

Be proactive and speak with your real estate professional before the open house to set ground rules and identify ways to protect yourself and your property.

Hide pocketable valuables and securely store anything with your personal information, like credit card statements and receipts. Consider displaying fresh flowers or bowls of fruit, bake a batch of cookies for the homey smell, open the drapes, turn on the lights, keep pets out of sight, and stay quietly in the background (or leave, if a real estate agent is showing your property).

Consider Consulting a Lawyer:

If you do hire a lawyer, make sure he or she has real estate experience and is accustomed to working on real estate transactions.

Start Organizing for Your Move:

Once the sale is final, we’ll provide you with a Moving Checklist to help you hire movers, order supplies, and pack up your belongings.

Ready to get your home on the market? Get in touch with us today and we’ll get started!

Scott Masters
Owner, Masters Real Estate Group


Handy Home Maintenance Tips

Welcome to our first blog post! We’ll be posting great content on a regular basis, so check back often or subscribe to our updates below.

If you’re a homeowner, it’s likely that your home is the most expensive thing you own. It’s a major investment, and it requires constant care. As a homeowner, you’ll find that maintenance is a constant. For our first blog post, and for a few of our upcoming blogs, we’re going to be delving into some home maintenance tips that you can follow to keep your home tip-top! Here’s how we suggest keeping up with the maintenance around your home.

Monitor your roof

Your roof is crucial to the integrity of your property. With a properly maintained roof, rain just runs off and shoots through your gutters and downspouts. With a damaged roof, rain can make its way into your attic, your ceilings and your walls. With a properly maintained roof, snow isn’t a problem. It can settle on your roof by the feet. With a damaged roof, snowfall could be a major hazard. A foot of snow could cause a collapse, and that endangers the safety of you and others.

We can help determine how old the roof is on your next home as part of the purchasing process.

If you own already, be sure to keep an eye on your roof. If you have shingles, always look for visible damage: Are shingles sliding off the roof? Are your shingles bare? If you have a tile roof, look for cracks and tiles that are out of place. If you notice any damage across the surface of your roof, it’s time for a fix.

Check your HVAC system

HVAC systems are built to last, but they aren’t built to last forever! Certain components in your HVAC system could last fewer than 15 years. It’s best to monitor the health of your HVAC units and have them checked at least once per year to ensure that they’re maintained and far from the brink of a breakdown. Again, if you’re home shopping, we can find out the age of the HVAC components in any home you are considering purchasing.

If you’re a homeowner already, you’ll want to pay extra attention to your furnace. A faulty furnace can be a real hazard, and it’s one of the most dangerous appliances in your home should it fail.

Well, those are my two tips for today surrounding home maintenance. Check back soon for part 2 and 3 of home maintenance tips and other great content on this blog. And as always, count on the Masters Real Estate Group for exceptional services whenever you’re looking for a new property!

Have an idea for content? Let me know!

Scott Masters
Owner / Agent
Masters Real Estate Group